Income protection prices up and cover reduced

When launched in June 2006, the policy paid a maximum monthly benefit of £2,500 or 60 per cent of gross salary if less. The cost was £4.50 per £100 of monthly benefit, so someone seeking maximum cover would pay a monthly premium of £112.50. It has written to policyholders telling them of a reduction in the maximum monthly benefit from £2,500 to £1,500, an increase in premium-per £100 of monthly benefit to £6.75 (a 50 per cent rise) and an increase in the period before benefit is first paid from 30 days to 90 days.

As the policy is written on a monthly rather than on an annual basis, tucked away in the small print is a condition giving the company the right to change any term, condition or premium by giving 30 days' notice.

Several insurers are cutting back on cover and increasing their cost.

Pinnacle is among those asking people for a 40% premium increase.

In a recession where more people are at risk from losing their job and most of us have less money to pay for any insurance, few insurers are being honest about their actions. News of cover cuts and price rises come from press stories. Insurers will gladly trumpet cover increases and price cuts with press releases, but few have the guts to issue a press release when they are dramatically increasing prices or cutting cover or adding a long list of occupations for whom they will no longer quote.

No one argues that insurers on this class of business are seeing more claims than before. No one disputes that insurers have to make money too. We can all count the number of people being restructured (laid off).

It is the back-door method of doing business, and that few are able to back demands for price rises of 40 or 50% with any real statistics on claims, that is really annoying consumer groups like Which?.

When times are tough you need to be able to rely on your insurer. Their own adverts often stress reliability. Huge price rises, drastic reductions in availability, and cuts in cover are not what consumers need now. Insurers often wonder why they get a bad reputation – they should be able to work it out for themselves.